May 21, 2008 AOKI Holdings Inc.

Transcription

1 Group Reorganization and Business Portfolio Management "Diversifying to concentrate" "Earnest shift to high-level services company" May 21, 2008 AOKI Holdings Inc. Fashion AOKI ORIHICA MX Bridal RAVIS Entertainment VALIC

2 Maturing suits retail market, and trend in sales by business division (Millions of yen) (Billions of yen) 120, ,000 80,000 60,000 40,000 20,000 0 AOKI Holdings' sales (LHS) Suits retail market (RHS) FY3/90 FY3/91 FY3/92 FY3/93 FY3/94 FY3/95 FY3/96 FY3/97 FY3/98 FY3/99 FY3/00 FY3/01 FY3/02 FY3/03 FY3/04 FY3/05 FY3/06 FY3/07 Source: AOKI Holdings and Yano Research Institute Other (ANNIVERSAIRE, etc.) FY3/99 FY3/02 FY3/05 FY3/08 Men s and Kids Retail Business Men s and Kids Retail Business Fashion Business Anniversaire/Karaoke Anniversaire and Bridal Business Entertainment Business Anniversaire and Bridal Business Entertainment Business Fashion Business % 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2

3 Business portfolio synergies Group reorganization allows for operation of multi-faceted businesses under a pure holding company To bring about full-fledged business portfolio management Conditions necessary to achieve positive synergies Link all businesses to a clear value chain in fields with absolute core competencies The financial characteristics of each business complement each other 3

4 Value chain linking diversified businesses Casual wear Men s wear Bridal Karaoke Café complex Factors that t link what appears at first glance to be unrelated businesses I Hard value chain: business skills leveraging chain store theory Chain store management know-how including detailed investment recovery schedules and standards for business withdrawal II Soft value chain: inspiring customers A thorough focus on providing quality products and services to satisfy and inspire customers, and a training system for implementation "AOKI: Where Each Thread Counts": Vertical merchandising know-how and experience from raw materials manufacturing up through selling to customers 4

5 Business domains based on concept of To enrich people s lives Bridal Business The ultimate extraordinary day Off (extraordinary affairs) Karaoke facility operation Café complex operation Fitness Casual Business On (ordinary affairs) Suits Business (including casual wear in AOKI and ORIHICA stores) Core flagship business Generation 5

6 Business development from standpoint of "spreading business opportunities" AOKI Group Business Portfolio Income strata Customers Men Entertainment AOKI Group Women Profitability Will continue to expand the business portfolio to incorporate a wide range of business opportunities And at the same time Age Weather Image Time Will commit ourselves to the total lifestyles of customers, not just selling suits, in order to move close to achieving our corporate ideal Environment Season Competition Growth prospects Market Diversifying to concentrate Conditions for business development Focus on fields where the AOKI Group can maximize its management resources of "growth skills in chain store management" and "providing quality products and services to inspire customers" Focus on fields where the AOKI Group will definitely be a winner For example: A market on the cusp of growth with no dominant players and in which the AOKI Group could immediately establish a dominant position after investing capital 6

7 Business development from the standpoint of financial characteristics Anniversaire/ Bridal 16.0% FY3/08 sales Entertainment 15.3% Fashion 68.7% Characteristics of each business Fashion business -- High shareholders equity ratio, cash-rich, High operating profit margin, low ROA Asset turnover Inventory turnover Shareholders equity ratio Fashion RAVIS VALIC Fashion RAVIS VALIC Fashion RAVIS VALIC Operating profit margin ROA ROE Fashion RAVIS VALIC Fashion RAVIS VALIC Fashion RAVIS VALIC : designates medium-term targets for each business *Parent figures of AOKI Holdings have been used for the Fashion business Bridal business (RAVIS) -- Capital investment needs still strong; operating profit margin nearly as high as in the fashion business; high ROA Entertainment business (VALIC) -- Basically second to the bridal business across various financial performance indices, and more funds are needed for capital investments Portfolio of businesses with complementary financial characteristics 7

8 Business portfolio diagram: already a winner in most diversification businesses Market size Winner Men s formal wear Local brand Casual Traditional flagship businesses form core of earnings Businesses with strong growth potential Simultaneous achievement of higher market share and growth in scale Top group Top group Karaoke Guesthouse wedding Niche focus Fitness Winner Café complex Mature market Market growth potential Growth market What ties all the businesses together is a spirit that aims to satisfy and inspire customers with comfortable lifestyles 8

9 Hard value chain: chain store management know-how Chain-store management skills refined over half a century Enormous data and know-how regarding chain store development Formulation of store formats to maximize efficiency at each location Planning of detailed investment recovery schedules and standards for business withdrawal Know-how to unearth problems at struggling stores and provide coaching Just-in-time logistics management "Chain stores are not about retail or sales, but about successfully producing an environment for the provision of consumables." (Japan Retailing Center) The AOKI Group leverages its chain store management know-how to provide hospitality with the best service quality. 9

10 Soft value chain: AOKI Group focus 1 Product quality and service determines sales We sell not products but lifestyles Example of thorough focus on product quality and style proposals "AOKI: Where Each Thread Counts": refining the vertical merchandising model Constant feedback and confirmation of policy Information gathering and product planning Materials development: production lines starting with a single thread PR strategy through media Design retail space centered on top quality Sales activities at retail stores Customer satisfaction and opinions Pursue best quality and maximize production efficiency Mote Slim a big hit Shift from displaying products by type to displaying products based on coordinated styles Total coordinate proposals using the stylist system The crux of marketing begins after the sale Complete involvement in all processes is core to the AOKI Group s marketing strategy 10

11 Soft value chain: AOKI Group focus 2 Management policies throughout the Group Business Integrity Social Responsibility Community Service Specific recent corporate activities Maximizing customer satisfaction and inspiration through quality improvements and refined services Specific methods of realization A thorough employee education and training structure rare among competitors - Creation of added value through service quality Example of education and training structures in each business Business Fashion business Bridal business Entertainment business Career advancement plan Establishment of a six-stage career advancement plan from new employees up through sales division representatives Establishment of a career advancement plan starting from assignment to a specialized course up through management Establishment of a six-stage career advancement plan starting from general employee Training period and content for new employees Six months: Introductory training, OJT, and follow up reviews Seven months: Basic education, customer service, on-site practice, and OJT according to job position Six months: Introductory training, OJT (retail operations and management), target setting, follow up Features Education and testing for career advancement, and training system to cultivate skills as a stylist After the seven-month training course, employees are assigned to specialist courses based on suitability. Education and training is thorough because human resources are the key to inspiring customers above and beyond the competition. Two training courses for newly accepted hires. The main feature is the use of a mock facility to provide hands-on training. A licensing system has been adopted for different stages of career advancement, and concentrated skill-up programs are obligatory. 11

12 Synergies from the value chain Total business development Efficient and speedy business development from utilizing and sharing chain store management know-how Cost reductions as business diversification brings about economies of scale and greater information volumes Promotion of marketing and sales Promotion of marketing and sales by utilizing customer lists and point systems from each business Store development Information gathering on properties; securing properties suitable for each business; and utilization of unprofitable stores within the Group Personnel Enhancing motivation through personnel exchange; career advancement for employees Securing talented human resources and improving efficiency through joint hiring across the Group Merchandise Efficient procurement leveraging economies of scale System Cost reductions through h sharing of administration i ti systems (accounting, personnel, etc.) 12

13 Current position of each business Business segment (relevant company) Fashion business (AOKI, ORIHICA, M/X) Bridal business (RAVIS) Entertainment business (VALIC) Category Founding period Current position Management resources and features Men s wear 1958: The Group s flagship business since founding 1935: Launch of Furuya Tailor Shop Casual 2007: AOKI Holdings takes capital stake Guesthouse wedding Café complex Karaoke Fitness 1986: Press Work Inc. established 2002: AOKI International (name at the time) takes capital stake 2005: AOKI International (name at the time) acquired the company 2000: AOKI International (name at the time) spun the company off 2005: AOKI International (name at the time) acquired the company Dominates market together with Aoyama Trading, the largest company in the industry Chain store management know-how accumulated over half a century supports growth in scale. Solid customer base created by not just selling suits, but proposing lifestyles. On-site strengths of discerning top-selling products and appropriate Brand-name stores rooted pricing based on over 70 years of casual store management. Brand in local l area strength th rooted in local l areas centered on Yamanashi, Nagano, and Shizuoka prefectures; also strong in making coordinating proposals. Third largest company in the industry Industry top Business know-how accumulated from involvement in house weddings since market s inception. Acquired chain facility development know-how from inclusion in the AOKI Group. Pursues added value through focus on enhancing human resources quality; high ratio of successful contracts proof of human resource strengths. Operates mostly in suburban residential areas. Recreates the image of a resort hotel to provide a relaxing atmosphere far different from the hangout image common to city-center comic cafes. Wide customer base from younger to older generations. Employee training differentiates the business from the competition. The facilities help customers relax using designs based on the image of resorts in southern France, and yet the layout enables low-cost Fifth largest in the operations. Space is provided to a wide range of customers as the industry facilities meet diverse communication needs. Sophisticated employee training at mock stores ensures high quality service, differentiating the business from the competition. The facilities create a relaxing atmosphere through wood grain interiors. The business specializes in fitness clubs with only machine rooms and studio programs in order to minimize investment costs and provide Focuses on niche markets customers with lower monthly fees. This differentiates the business from major fitness clubs which also offer pools and baths but charge higher monthly fees. AOKI Group DNA shared by all businesses Know-how to expand profits through building a chain of stores following establishment of a business model. Thorough focus on product and service quality to satisfy and inspire customers. Propose optimal styles for different life stages rather than simply sell products. Achieve growth in scale through chain store development, but at the same time focus on human resources training and growth in quality. 13

14 Direction for each business through strengthening of group management Business segment (relevant company) Category Outlook for industry environment Conditions for growth Future direction and group synergies Fashion business (AOKI, ORIHICA, M/X) Bridal business (RAVIS) Entertainment business (VALIC) Men s wear Casual Guesthouse wedding Café complex Karaoke Contracting Sustained growth, but diversification of categories Stable high growth Focus more on product manufacture and human resources training than opening new stores Create added value through a focus on product manufacturing and differentiated services Focus on maintaining and improving quality of human resources, the most important soft element of the business Will continue to open new stores to meet our 1,000 store target. With a change in environment from the days when the buzzwords suburban and motorization were popular, we will focus on opening smaller stores with concentrated categories in urban areas and shopping centers. Strengthening the Group structure will add diversity and flexibility to store opening plans. Change direction from enhancing product lineup to focusing on select products and aim for greater added value. Target PB ratio of 50%. In addition to traditional on-site strengths, leverage AOKI s detailed strategic development know-how to optimize store development and improve gross profit margins. Further raise position in the guesthouse wedding industry which continues to see high growth. Continue to open quality facilities leveraging the funding and property procurement strengths of the AOKI Group. Avoid reckless expansion of the facility network without an accompanying increase in quality human resources; establish brand value through further quality improvements. Raise social awareness of the Continue to aggressively open facilities primarily in the suburbs. Diversify facilities as a relaxation space, facility openings by uniting closer with the AOKI Group to leverage its Ongoing high growth and provide services to meet knowledge of roadside property development. Dominate the undeveloped customer needs for true relaxation. industry and expand presence. Peaking somewhat Provide clean entertainment that is welcomed by a wider range of age groups Provide karaoke, a healthy leisure activity, and multiple-use party space, to a wide range of age groups. Strengthen low-cost high-value investment by opening furnished facilities leveraging Group management strengths. Fitness Continues to expand Provide attractive content to differentiate from comprehensivetype competitors Plan expansion in niche markets with medium-sized, low-priced facilities Merits of strengthening group management for all businesses Substantial increase in property selection choices for integrated store openings with other businesses, etc. Reduction in developer selection costs, materials procurement costs, and other investment costs for new store openings Greater shared use of customer information Reduction in administration costs due to greater sharing of know-how Stronger group credit; introduction of human networking and negotiation strengths 14

15 Ultimate goal: firmly establish brand value Continue to enhance corporate value Eventual expansion of overall Group cash flow Ample funds from flagship business of men s wear sales Invest Diversification into businesses to enrich people s lives " Growth to top level of the industry; enhancement of service quality Capture of excess profits through brand value Break out of standard position! Upward shift in position in fashion industry Firm brand establishment of AOKI as a high-level services company Brand image channels back to the fashion business Establish brand centered not on men s wear, but the concept of to enrich people s lives" 15

16 Management style as high-level services company Autonomy and independence Each business is given autonomy and independence, and the head of each business is responsible for growth. AOKI Holdings provides human networking and negotiating strengths. The head of each business pursues strategies for growth in scale, while employees pursue growth in quality through service quality improvements. Aim for earnings growth through chain store management, and satisfy and inspire customers by enhancing product and service quality. Pursue growth in scale, and guarantee future profits by securing brand value. Hybrid Two a balan apparent nce well growth i tly contr to simul in quality radictory ltaneous y and vo y dynami sly achiev olume ics ve 16

17 Hybrid & Independence management: growth as a high-level services company" Growth strategy of business head Continue to pursue growth in both quality and volume to ultimately establish brand value Improvement po e tof employees service quality Chain store management Left turbo Group caretaker team AOKI Holdings Centripetal force Management principles Right turbo Management implementation team AOKI ORIHICA MX RAVIS VALIC Satisfy and inspire customers Growth in brand value Group coaching Professional management in each business Growth in scale 17